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COA rules on coal bed gas dispute

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In settling a dispute between two Illinois companies regarding who has the legal right to recover coal bed methane gas, the Indiana Court of Appeals made its decision based on public safety and ruled in favor of the company assigned the coal bed gas lease.

The issue in Cimmaron Oil Corp. v. Howard Energy Corp., No. 26A01-0902-CV-67, is whether a 1976 lease that Cimmaron's predecessor obtained for the right to drill for and produce oil and gas includes the exclusive right to drill for and produce coal bed methane gas (CBM).

The Hardimans own the real property in Gibson County at question in the suit. In addition to the 1976 lease Cimmaron has, the Hardimans granted a coal bed gas lease to Howard Energy in 2001. In 2003, Howard Energy filed a complaint for declaratory judgment against Cimmaron and the Hardimans. Howard Energy argues the Cimmaron lease covers only the oil and gas estate and includes only the conventional natural gas emanating from the coal, while its lease holds the right to extract the coal bed methane.

The trial court issued declaratory judgment in favor of Howard Energy, adopting the "eastern rule" that CBM is part of the coal estate, and no interest in CBM passed by reason of the 1976 oil and gas lease. The trial judge also discussed public safety and how giving away control of the CBM from the coal mine operator wouldn't serve public interest.

Because the concept of producing CBM for commercial gain wasn't possible in 1976, it's up to the courts to determine whether that lease somehow permits it.

The Court of Appeals used rulings from other jurisdictions on the presumed or surmised intent in the grant of oil and gas leases pre-dating current technology. Some courts have considered CBM as part of the coal bed estate, as part of the oil and gas estate, or a distinct mineral estate.

The trial court in the instant case followed the "eastern rule" that CBM is a component of coal and CBM production and coal mining are best left in the control of a single entity, wrote Judge L. Mark Bailey. Cimmaron would rather the court adopt the "western rule," which says the holder of a broadly defined gas and oil estate may have rights to CBM, which is a form of gas.

The gas estate owner wasn't granted permission in the lease to invade the coal seam, which would be necessary to produce the CBM. In fact, the CBM would be from virgin coal seams and would require fracturing the seam with high pressure.

"The Hardimans did not explicitly agree to Cimarron's invasion of the coal bed in this manner; it is not reasonable to presume that the intent was to permit invasion of a valuable land asset, the coal bed, should a means of making profits arise in the future," wrote the judge.

The appellate court declined to adopt either rule, but agreed with the trial court that public policy would militate toward considering CBM to be part of the coal bed.

"Public safety would be disserved by pitting the miner who needs to dissipate CBM to prevent explosions against the gas estate owner whose financial resource is being depleted," wrote Judge Bailey. "Nevertheless, it is within the province of the Legislature, to which we defer, to make policy decisions."

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  1. Don't we have bigger issues to concern ourselves with?

  2. Anyone who takes the time to study disciplinary and bar admission cases in Indiana ... much of which is, as a matter of course and by intent, off the record, would have a very difficult time drawing lines that did not take into account things which are not supposed to matter, such as affiliations, associations, associates and the like. Justice Hoosier style is a far departure than what issues in most other parts of North America. (More like Central America, in fact.) See, e.g., http://www.theindianalawyer.com/indiana-attorney-illegally-practicing-in-florida-suspended-for-18-months/PARAMS/article/42200 When while the Indiana court system end the cruel practice of killing prophets of due process and those advocating for blind justice?

  3. Wouldn't this call for an investigation of Government corruption? Chief Justice Loretta Rush, wrote that the case warranted the high court’s review because the method the Indiana Court of Appeals used to reach its decision was “a significant departure from the law.” Specifically, David wrote that the appellate panel ruled after reweighing of the evidence, which is NOT permissible at the appellate level. **But yet, they look the other way while an innocent child was taken by a loving mother who did nothing wrong"

  4. Different rules for different folks....

  5. I would strongly suggest anyone seeking mediation check the experience of the mediator. There are retired judges who decide to become mediators. Their training and experience is in making rulings which is not the point of mediation.

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